PROBLEM 2

1. GOODWILL

Consideration transferred:
Cash 18,000,000
Expected par value of Contingent 400,000
Consideration - 1M x 40% probability
Common Stock (P80 market value x 50k 4,000,000
shares)
Consideration transferred 22,400,000
Less: Market Value of Assets and Liabilities
acquired:
Cash 90,000
Receivables 190,000
Inventories 7,000,000
Plant and equipment, net 40,000,000
Secret formula 7,000,000
Brand names 5,000,000
Trademark 4,000,000
Decrease in Liabilities (400,000)
Long-term Liabilities (47,000,000) 15,880,000
Positivie excess - Goodwill 6,520,000

Books of Acquirer

Journal entries of Tony, Inc. in the Acquisition of Assets and Liabilities

Cash 90,000
Receivables 190,000
Inventories 7,000,000
Plant and equipment, net 40,000,000
Secret formula 7,000,000
Brand names 5,000,000
Trademark 4,000,000
Goodwill 6,520,000
Current Liabilities 400,000
Long-term Liabilities 47,000,000
Cash 18,000,000
Estimated Liability for Contingent 400,000
Consideration - 1M x 40% probability
Common Stock (P2 par value x 50k 100,000
shares)
Additional paid-in capital (P80- P2) x 50k 3,900,000
shares
 Journal entries of Tony, Inc. in the Acquisition expenses
Acquisition-related expenses/ Accumulated 1,100,000
profit or loss/ Retained Earnings
Cash 1,100,000

Journal entries of Tony, Inc. in the Cost to Issue and Register Stocks
Additional paid-in capital/ Share premium 500,000
Cash 500,000